2018 was a challenging year for much of the tech world, and not only because of the depressed stock market. A number of high-profile failures taught several lessons:
- maintaining momentum (and revenue growth) at vast scale is truly difficult and ultimately impossible: nothing can grow forever.
- finding hard but solvable problems is tougher and tougher, in part because so much has to go right to win in billion-person-sized markets.
- whether in Moore’s law, pharmaceutical drug development, or social software, after you solve the initial hard problem, the road only goes uphill and gets rockier. Apple delivered the iPod then iPhone/iPad, and that may be the extent of their core market. (Cars? Healthcare? I’m not holding my breath.) In hardware, Intel entirely missed the mobile- and smartphone segments after dominating the desktop, and Nvidia is seeing a major slowdown in sales as bitcoin miners and self-driving cars are not providing the updraft the company expected.
1) Hardware robotics lacks key knowledge of how people understand machines
Over the course of 2018, three high-profile robot companies shuttered operations. Kuri, a social robot built on a platform Bosch hoped to commercialize, was priced at $700. Jibo, founded by MIT affective robotics pioneer Cynthia Breazeal, had raised upwards of $60 million and was designed to sell for about $1,000. Finally, the biggest fish in the pond of dying robot companies was Heartland, later renamed Rethink Robotics. It was founded by MIT AI/robotics superstar Rodney Brooks and had raised $150 million to make user-friendly (no safety cage required) light industrial robots that could be simply programmed and work amidst people. These so-called “cobots” (collaborative robots) called Baxter and Sawyer were aimed at small manufacturing and shipping facilities that needed an occasional helping hand: flexibility and adaptability were the bots’ calling cards rather than power, durability, or accuracy.
In the case of the household bots (Kuri and Jibo), the functionality was largely achieved by Amazon Echo and Google Home smart speakers at 5-15% of the price. Jibo employed a complex and expensive 3-axis motor system to give the table-top device an emotionally appealing “body language.” It was billed as a companion but couldn’t keep a shopping list, told jokes but couldn’t shoot decent photos, and joined other prominent crowdfunding projects that over promised and under shipped. Jibo started out global and was retrenched to North America only. And so on. (For those who are interested, here’s an excellent post-mortem on the Jibo.)
In all 3 cases, figuring out what people value in a robot, how they value it, and what they will give up in exchange still appears to be beyond the state of the field: even deep-pocketed giants including Sony and Honda have found consumer robotics to be an impossible mass market to crack. In part, engineers tend to design robots that can’t be produced at sufficiently low price targets. Further, it’s unclear how many people want to bond with an electronic device: even the Roomba, a relative success, does not remotely approach Apple/Android sales volumes. In short, it’s not at all clear what widely shared problem Jibo solves that Alexa can’t.
2) Social media giants quite simply do not value their users’ identity and privacy (in the US especially)
Every few weeks, Facebook is found to have done something that demonstrates a complete disregard of users as people. Twitter continues to condone personal abuse, often by troll bots, while presenting “innovations” unrelated to the service’s core mission. Google+ was a privacy disaster (here’s a good article), starting with a “real names” enforcement that did not follow the core concept of Google’s own Circles product, that people relate to different other people using different identities: Adam in a classroom, Adam the book author, Adam the scout troop leader, Adam the poker player, Adam the church deacon, Adam the AA member. Internationally, Alibaba’s Sesame Credit was for a time connected to the larger Chinese governmental social credit initiative, and it’s possible that Alibaba’s cloud computing subsidiary is involved with running the latter given that it frequently serves as a contractor to governmental agencies.
If a US citizen travels to Europe and logs on, meanwhile, Google helpfully presents all manner of privacy tools that are either hidden or unavailable stateside. (I have no idea what Facebook logins look like in either the US or EU.) Google leads US corporations in lobbying spend, and it’s easy to see why, given the larger dynamics at play in the ad/media landscape. It’s staggering how little people know or comprehend about what’s happening: students regularly assert that “Facebook sells our data” when a) that’s not literally the case and b) the truth is that Facebook largely constructs then monitors and markets these students’ digital identities, which is something else entirely.
There is no analogy in economic history (“data is the new oil” is wholly insufficient) that adequately explains or even suggests what is happening, and Google is right to be worried about regulation that could be written ham-fistedly and have many unintended consequences. At the same time, who outside of maybe EFF is lobbying on behalf of the users? Someone on Twitter made a great point about poor people who use Facebook as a utility: white elites who step off (Walt Mossberg being the latest) are in a very different situation compared to many millions of Facebook users, given their many sources of social capital. I’m not at all sure what _should_ happen here, but am watching all the same.
3) How long can Netflix abandon the long tail for being a neo-Disney hit-maker?
Long ago and far away, Netflix rented every possible DVD, satisfying customers’ need for choice and curation (“people who liked X also liked Y”). Beginning about ten years ago, with streaming supplanting the mailed discs, Netflix began investing vast sums of largely borrowed money on original content. All those old movies people used to rent went into mothballs, to be replaced with Netflix originals and a few select chestnuts to be trickled out then pulled back. If you or your children want Disney titles, meanwhile, those will all likely be gone in a year as Disney shifts its content to its own streaming platform.
Netflix is no longer an online Blockbuster Video; it’s competing head to head with Disney and Viacom not only for viewership but increasingly for creative talent. Longtime Hollywood writers and producers are getting contracts from Netflix in nosebleed territory: Shonda Rhimes (responsible for hits including Grey’s Anatomy and Scandal) landed a production deal reported in the $100 million range. 21st Century Fox lost Ryan Murphy (Glee, 9-1-1, The People v. O.J. Simpson); Netflix gave Murphy a $300 million deal, according to whisper numbers. Finally, Netflix has spent still more money on production infrastructure in both Los Angeles and New Mexico. It’s a simple question: how long can Netflix borrow the money to pay more people to build more content to satisfy its viewers who live in more and more (and more diverse) countries every year?
4) Who will pay for 5G?
As 5G wireless rolls out in the coming years, the confusion will be considerable. AT&T is calling its 4G improvements 5G Evolution, which is not true 5G. 5G is not backward compatible with 4G, so users will need new equipment. What this equipment might include will be interesting. True 5G features higher transmission speeds and lower latency; gamers should be very excited. It also requires more antennas because the cells are smaller. Thus stationary broadband (home and small business) looks to be an opportunity for wireless providers led by Verizon and AT&T to steal market share from wired broadband providers including Comcast and . . . AT&T.
Besides watching Netflix and playing Fortnight, what else is 5G good for? True enterprise-grade broadband is frequently mentioned as a prerequisite for “smart cities” in which everything from water mains to traffic lights to drones and other surveillance cameras can be instrumented and eventually programmed to perform better. Traffic gridlock alone is often mentioned as a substantial opportunity.
There are many opportunities, some sinister (either China’s social credit scoring or enhanced police and government surveillance, possibly without adequate oversight, here at home). But for our purposes, the more relevant issue was illustrated this summer during the California wildfires. Verizon was throttling a firefighting team that had exceeded its monthly wireless data limit, the fire chief linked the behavior to net neutrality, and the PR hit to Verizon was significant. The more important point for our purposes is that state and municipal governments are cash-starved: property tax receipts drop every time Sears closes a store, costs for health care rise every year, and longer life expectancies mean longer pension payouts to retirees. While enhanced gunshot location, faster infrastructure repairs, and other sensor-driven municipal scenarios sound appealing, there is a real question lurking: who exactly will pay for the bandwidth and related equipment to make them happen?
5) Last year it was Bitcoin, this year it’s supply chain blockchain
Back when I worked in consulting, there was a saying: “in mystery there is margin.” Conversely, once enterprise IT buyers figured something out for themselves, its price dropped rapidly into commodity territory. Thus we see consulting firms spending lots of money, time, and effort on “thought leadership” built for the express purpose of being able to charge for something the client doesn’t fully understand.
In 2019, when more people realize that “enterprise blockchain” is a modern implementation of a distributed database, some of the irrational exuberance may die down. Yes, faster invoice reconciliation, more granular product recalls, and less fraud are benefits, but those benefits do not accrue because blockchains are built from some kind of magical fairy dust. Note that IBM’s definition of blockchain never once mentions the relationship of the new kid to the grandfather:
*****
There you have it. 2019 will be an important year for many tech companies to stabilize revenue growth, deliver meaningful innovations, and get their operational houses in order. Of course we will see surprises (Uber and Lyft’s IPO valuations?) but there don’t seem to be any hot new startups to track right now: the old order seems to be relatively stable, with Dell, IBM, and HP (among others, obviously) needing to reinvent themselves for the age of mobile device supremacy and eventual commercialization of AI. I don’t see a Netscape, a Salesforce, a Google, or a Facebook on the horizon, which probably spells trouble in the long term — where are the new innovations going to come from? — but makes for a relatively calm landscape in the short run.
Speaking on a personal note, I hope the new year brings health and happiness to each of you, along with your loved ones.
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